Moody's: Pharma sell-offs put credit ratings at risk

Moody's has come out with a contrarian view of a Pfizer break-up. Of any pharma break-up, really, but it's the potential sell-off of Pfizer assets that has everyone talking these days. The credit ratings agency agrees that selling off non-core assets might boost share prices and "unlock value." But it might also turn out to be a risky strategy over the long term.

In fact, it might prompt Moody's to downgrade companies once they've sold off those non-pharma businesses, Moody's SVP Michael Levesque told the Wall Street Journal Health Blog. "Credit ratings benefit from size and scale, and diversity," Levesque said.

Obviously, if Pfizer offloads its animal health, nutritionals, consumer health and established products businesses, it's going to be dependent on branded prescription drugs. Developing new ones will be more important than ever. Non-pharma assets are more stable, Levesque said in his report, with "lower R&D risk, less exposure to patent risk and reduced litigation threats."

As the Health Blog points out, Merck has apparently decided to hang on to its assets in animal health and consumer health. Companies such as Sanofi-Aventis have been building up in those areas for precisely the reasons Levesque cites, aiming to hedge their pharma bets. But other companies--such as Roche--have criticized that diversification strategy.

- read the Health Blog post